Faced with an increasingly stagnant domestic market and greater competition in Asia from equally novel Chinese and Japanese products, K-Beauty brands must now, more than ever, look farther afield to secure their stake in the global beauty and personal care market.

That’s according to the latest research from Euromonitor International analysts, who believe it is essential that K-Beauty brands expand their reach—both geographically and categorically—to sustain growth in 2019.

Currently, demand for K-Beauty is centred in South Korea and in nearby Asian markets. However, opportunities for further growth in South Korea are limited and overseas K-Beauty faces competition from personal care brands inspired by the cosmetics trend, such as Chinese brand Hanhoo, UK player Oh K! and US brand Joah.

Building Brand Power

J-Beauty and C-Beauty trends also pose serious threats to Korean beauty players. In recent years, Japan has followed the path set by Korean beauty innovators, with scores of J-Beauty brands leaving the comfort of their home market. Japan boasts the highest per capita spending in beauty products, but with an aging population, companies must venture abroad where they are challenging the very same cosmetics players for market share.

According to data from the Japanese Ministry of Finance; Japan exported beauty and makeup products worth $3.89 billion in 2018, up nearly 50% from $2.62 billion in 2017. In addition, exports of Japanese beauty and makeup products to China increased nearly 80% year-on-year to around $1.3 billion.

According to Euromonitor International, K-Beauty must rely less on its beauty routine concept to reassert itself in overseas markets, and instead build stronger brand power before its fame fades.

The beauty and personal care sector in the Asia Pacific region recorded a “remarkable” global performance in the period 2012-2017, according to Euromonitor International. And in 2018, South Korea exported beauty and makeup products worth $4.93 billion, according to the Korea Customs Institute.  This is a year-on-year increase of nearly 26% from $3.91 billion in 2017. China was the largest export market for South Korean products in 2018, accounted for approximately 41%, followed by Hong Kong, the US, Japan, Vietnam, Thailand, Russia and Taiwan. What’s more, the beauty and personal care category in Asia Pacific will continue to drive global growth with a retail value CAGR of 4% forecast for the five years from 2017 to 2022.

According to Lisa Hong, a beauty and fashion research analyst at Euromonitor International, it’s clear that the Asia Pacific region will remain a lucrative market for K-Beauty products, but the category’s reliance on the Asia market could also leave it vulnerable to external factors, such as political disputes.

“Therefore, it [Asia Pacific] could remain a springboard for K-beauty’s expansion in the short term,” Hong told Happi. “However, one question on many lips is when will Asia Pacific stall and which region will take the spotlight next?”

“The gap between Asia Pacific’s per capita spend on beauty and personal care and the global average is around $26, indicating that vast growth potential will remain in Asia Pacific in the medium term but in the longer term, K-Beauty players will need to consider penetrating other regions, which may prove to be more dynamic, such as Latin America and the Middle East and Africa,” she added.

Ill-Prepared To Go Global

There are already strong pockets of demand for K-Beauty products outside Asia. However, the K-Beauty trend is far from mainstream in these markets. According to Euromonitor International, previous attempts at international expansion by K-Beauty brands were executed quickly during the peak in the concept’s fame and many were ill-prepared for global interest and the diverse requirements of consumers outside Asia. 

To successfully execute global expansion and claim a concrete long-term stake in the global beauty and personal care industry, this analyst reports that K-Beauty players will need to learn to better communicate its message to non-Asian consumers.

“The first spotlight on South Korean culture was TV drama, which then shifted to music, food and now beauty and personal care. K-Beauty’s biggest strength is in its novel concept; a blend of oriental ingredients, high product quality and fun packaging all contributing to build a ‘selling concept,’” Hong told this publication. “Domestic consumers who are very demanding of manufacturers to provide quality products, and their high knowledge and interest in beauty products will continue to support K-Beauty to see fast innovation compared to global standards.”

K-Beauty only has limited global exposure and experience and needs to take a careful approach when penetrating the world with its unique features.

Understanding regional nuances and consumer preferences when attempting to penetrate new markets is critical, and K-Beauty brands will need to take into account the desired benefits from region to region to establish new unique selling points.

This could include changes in formulation to meet demands of specific markets, identifying the best retail channels for their products and reducing reliance on online retail, and even expanding into new categories to fill voids in their existing offerings.

“Within soft drivers, which use empirical research and local market observations, most regions have severe competition as a negative factor while positive factors differ in each region from product variety to consumer awareness,” concluded Hong. “Identifying such different pain points and opportunities by region should be considered when looking further to growth potential.”

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Michelle Yeomans
Freelance Journalist
Email: [email protected]

Michelle Yeomans is an award winning multimedia journalist. She has been reporting on cosmetics industry movements in EMEA, US and Asia for five years and has won an award for her coverage of the complexities of operating in the Middle East. Michelle’s passion lies in tracking the beauty culture and trends of the Asia Pacific region. Ever the AV enthusiast, she also relishes the opportunity to create engaging video and podcast content for the B2B industry.